Some say that a cash only diet is a helpful method to avoid overspending. After all, having your weekly spend in cash means it is easy to see when funds are getting low (because your wallet will literally be thinner).
The pain of paying
Others advocate a cash only diet as a way to curb splurges and impulse buys by physically reconnecting with handing over money in a way that swiping a plastic card can eliminate. Several studies suggest people are willing to pay more when using cards than when using cash.
As this slideshow notes, it is important to know your income and how you’re spending before embarking on a cash only diet.
A basic budget is a good first step.
Once you know how much you have coming in and going out, you can decide how long you want the cash only diet to last and other specifics, such as how much cash you’re comfortable carrying.
Make a budget
A good first step in any saving and investing plan is to see how much money you have. A basic budget can help you work out income and spending. It should confirm how much is available to spend on the cash only diet.2
How much cash are you comfortable carrying?
A danger with the “cash-only diet” is that you can lose money or have it taken from you. This is important for security. Consider this when planning how much cash you want to carry. More regular withdrawals of lesser amounts might work well.3
Can you pay cash?
Do you have transactions that are difficult to pay by cash. Think, magazine subscriptions, rent or utility bills. In this case, you might want to create exceptions that you can pay with a bank transfer – just remember to work it in to your budget.4
Use an envelope?
Blogger Oliver Burkeman used a system of envelopes to literally divide his discretionary spending into categories – one for groceries, one for transport and so on. The technique may stop a cash dieter overspending at the grocery store (and being left stranded with only the option to walk for free for the rest of the month).5
Put it on ice
If you’re worried you won’t be able to resist using credit cards, perhaps try the old trick of freezing them in a block of ice (and clear any memory of the details stored online). At the very least it will delay use while the ice melts.6
At the end of the month, it’s always a good idea to check your spending matched what you had planned. That way you can make adjustments up or down to keep in budget and meet your money goals.